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A Comprehensive Guide on Filing Quarterly Percentage Tax Return

A Comprehensive Guide on Filing Quarterly Percentage Tax (BIR Form No. 2551Q)

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What do you need to know about filing BIR Form No. 2551Q or Quarterly Percentage Tax?

  1. Who needs to file BIR Form No. 2551Q?
  2. When and where you can you file?
  3. How can payments be made?
  4. What penalties will be imposed upon failure of filing?

 

Taxation in the Philippines has undergone major transformations and new laws were implemented at the beginning of the fiscal year 2018. For those that use an online tax calculator in the Philippines, don’t be too alarmed. We’re sure companies will learn to adapt and change their algorithm appropriately.

That said, even if you do use online tax calculators or don’t handle your own taxes, you still have to remain informed. The TRAIN law changed a lot of things regarding tax computations and filing. One change in particular and the one we’ll be discussing today is the revised BIR Form No. 2551Q or the quarterly percentage tax return.

The BIR recently released this form on April 25, 2018 – the last day of filing quarterly percentage tax return – and many were left confused. If you’re one of those people, then we’ll help you out. Below is a simplified yet comprehensive version of the guidelines and instruction that the BIR released.  Hopefully, this helps you understand everything about BIR Form No. 2551Q.

Who Can File BIR Form

Who Can File BIR Form No. 2551Q?

BIR Form No. 2551Q should be filed in triplicate by:

  • Non-VAT taxpayers with gross annual revenues not exceeding P3M
  • Domestic and international carriers except those who use bancas and animal-drawn vehicles
  • Franchisees of  the either of the following: gas or water utilities;  radio and/or TV broadcasting companies whose gross annual revenues do not exceed P10M; services that send overseas dispatch, messages, or conversations from the Philippines
  • Proprietors, lessees, or operators of cockpits, cabarets, racetracks, night or day clubs, professional basketball games, etc.
  • Banks, non-bank financial intermediaries and finance companies
  • Life insurance companies and agents of foreign insurance companies

 

When and Where You Can You File?

BIR Form No. 2551Q shall be filed and the tax shall be paid within twenty-five days after the end of each taxable quarter. So, from the 15th of April, July, and October, the deadline has been moved to the 25th of the same months.

You shall do this with any Authorized Agent Banks (AAB) of the Revenue District Office (RDO) where you are registered or are conducting business. In case there are no AABs, then this form shall be filed with the Revenue Collection Officer (RCO) of your RDO.

If you’re the owner of a franchise, you can file a separate return for your head office and for each branch or you can file a consolidated return for the head office and included branches.

 

How Can Payment Be Made?

Payment can be made manually or electronically. If you’re opting for manual payment, you can do what was mentioned above.  Head to the AAB located in your area that is within the jurisdiction of the RDO or file your return with the RCO.

Online payment, on the other hand, can be accomplished using GCash Mobile Payment, Landbank’s Linkbiz Portal or DBP’s Tax Online. Note that you would still have to manually calculate your corresponding tax dues, as these channels require you to already enter said tax due amount. If you prefer to skip the manual calculations, you can try out Taxumo, a local web-based tax app, that auto-calculates your tax dues, auto-fills your tax forms and lets you file online with just a click of a button.

 

Penalties

What Penalties Will Be Imposed Upon Failure of Filing?

The taxpayer will incur a surcharge of 25% in cases where he/she:

  • Failed to file and pay their quarterly percentage tax return on or before the deadline
  • Filed a return with the wrong person or officer
  • Failed to pay the full or part of the amount of tax due; or
  • Failed to pay deficiency tax

The taxpayer will incur a surcharge of 25% in cases where he/she:

  • Willfully neglected to file the quarterly percentage tax within the prescribed period; or
  • Willfully made a false and fraudulent return

 

Key Takeaway

Outside of the math and computations, that’s practically everything you need to know about BIR Form No. 2551Q. Whether or not you use an online tax calculator in the Philippines, it is important that you are aware of the changes made in how we file our taxes.

The BIR has yet to iron out other processes, so more changes are sure to come over the year. If you don’t stay on top of things, then you might find yourself struggling with the transition. And always remember that one misstep can land you in a lot of trouble, so stay informed and updated!

 

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You may also want to check out our other articles below:

5 Bookkeeping Tips for Those who are Self-Employed

5 Bookkeeping Tips for Those who are Self-Employed

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What are the best bookkeeping tips for self-employed individuals?

  1. Keep logs of your  income & expenses.
  2. Hold on to all financial documents.
  3. Separate professional and personal assets.
  4. Educate yourself in finance and taxation.
  5. Make use of available tools available to simplify the process.

 

One of the biggest walls that self-employed individuals often run into is handling their finances. It’s more than just filing and paying their taxes – because those in the Philippines can use an online tax calculator for that – but the entirety of managing their money.

Handling your own finances is one of the many responsibilities that come with being self-employed and also one that not many are ready for. It is not a skill that can be learned overnight, which makes it even harder to develop. It takes weeks, months, maybe even years to be able to do it properly.

However, if you have enough drive and determination, then you’ll be able to learn how to do it in the nick of time. We’ve even left some bookkeeping tips for the self-employed and all you have to do is to scroll down:

Keeping track of expenses

Keep Logs of Your Income & Expenses

One of the best ways to stay on top of your financial situation is to keep detailed logs of your income and expenses. Sure, online and mobile banking has given us the ability to check our balance at any moment, but do not be satisfied with this. Although you know how much you have, it doesn’t exactly tell you when and where your money is coming and going.

Having actual logs of your expenses will allow you to check your spending habits and adjust accordingly. It will also make budgeting easier since you’ll be able to see where you can cut down costs. Plus, this is another great way to keep track of your cash inflow vs. outflow. And that’s how you’ll know if you are making profit or not with your business.

 

Hold on to All Financial Documents

On the off chance that you or your business gets audited or investigated, you are going to be asked to present several documents like invoices and bank statements. If you can’t provide any, then you’ll be put under a bad and may get into some trouble.

Besides this fact, financial documents can also help lessen your tax. If you provide proof that a purchase or transaction was made for the purpose of your business, then you can immediately deduct it from your total tax due.

Moreover, it makes tracking your expenses a lot easier if you hold on to the documents. But don’t just chuck them in your desk drawer. File your receipts, statements, and other documents in chronological order so you can easily access them at any time.

Assets

Separate Professional and Personal Assets

It’s hard to separate your professional and personal assets when you’re working for yourself. The line between the two is often blurred since work is so heavily integrated into your daily life. However, you need to make the effort to clear the line between them, and you can do this by opening up separate accounts for your business transactions.

There are many benefits that come with doing this and one is that it allows you to see just exactly how much money is tied up in your business. It also prevents you from getting into financial trouble because budgeting and costing are made simpler. By the end of every year, you’ll find it easier to track your business activity because your personal expenses have already been separated from your business ones.

Educate Yourself in Finance and Taxation

Knowledge and information is the best thing to have when it comes to managing your finances, especially for self-employed individuals who are aiming to build their brand. You’ll be surprised at how quickly freelancers and start-up businesses lose their money because of lack of knowledge on the matter.

This doesn’t mean, however, that you have to get some type of formal education on finance and taxation. There’re lots to learn when it comes to bookkeeping like effective and plausible ways on how to cut back, save, and make money, and you can learn all of them through online resources or by asking the right people.

 

Make Use of Technology to Simplify the Bookkeeping Process

For many of us, as much as we’d like to diligently keep our books, we may not have the time to do it ourselves, nor the budget to hire a bookkeeper for us. That’s where technology comes in. There are online apps you could use such as Taxumo, that allows freelancers and SMEs  to simplify the bookkeeping process, by auto-generating journal entries, which you can download, paste / transfer to your Manual Books of Accounts. 

 

Key Takeaway

It’s hard to be self-employed and manage all your finances and taxes on top of your workload. Thankfully, those in the Philippines can use an online tax calculator to lessen the difficulty of filing and computing taxes, but what about the rest of the money stuff? How do you make bookkeeping easier?

Well, it starts by developing the right habits and obtaining the right information. If you just follow the tips listed above, you’ll be able to properly handle your finances like the true boss that you are!

 

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How to Avoid Delays in Filing Freelance Taxes in the Philippines

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How can you avoid delays in filing freelance tax Philippines?

  • Register before you start being a freelancer
  • Improve your tax knowledge
  • Use an online tax calculator to compute your taxes and file them on time

 

People who earn income, manage their own business, transfer personal or real properties, are all required to pay taxes. The freelance industry is not a stranger to this involuntary fee. There are many perks to being a freelancer – the decent pay, flexible work hours and the comfortable workspace.

One of the things that can become a burden is filing taxes. The Philippine Freelance industry is also required as professionals to register under the appropriate category with the Bureau of Internal Revenue (BIR) and get a Tax Identification (TIN) in order to file and pay your taxes. With the passage of the Tax Reform Acceleration and Inclusion (TRAIN) law, all taxpayers with an annual income less than Php 250,000 are exempt from paying taxes.

Professional freelancers who earn more than that threshold, have to file their income tax based on the graduated tax table as well as three percent percentage tax. In addition, you must pay 12 percent VAT if your annual revenues are greater than Php 3,000,000 but if you qualify as a non-VAT taxpayer, you can opt to pay eight percent on gross receipts.

Becoming a regular taxpayer can be a chore if you are too occupied with projects and deadlines. Good thing there are online tax filing platforms that are perfect for freelancers. Still, you have to file and pay taxes, late filing of income tax return can be a great cause for penalties which mean additional expenses for you. So, to save yourself from financial, personal, and entrepreneurial inconveniences, here are tips and common mistakes you have to avoid in filing freelance tax in the Philippines:

 

Register before you start being a freelancer

 

Like any other professionals or business, freelancers must be registered with the BIR. In the Philippine Tax Code, it is stated in section 74 that an individual receiving an income within sources within or outside the Philippines are required to pay taxes. Most freelancers forget this requirement and their freelancing gigs remain unregistered with the BIR. Do not imitate others who intentionally avoid this obligation.

It doesn’t matter if you are engaged in full-time or part-time work, if you are earning income from your job, then you have to file and pay your taxes. You should know that the BIR defines the professionals under the category of self-employed as:

  • Persons engaged in business and who derive their personal income from such business;
  • Professionals such as (1) “persons who derive their income practicing their profession” like lawyers, and those registered with the Professional Regulation Commission (PRC) such as doctors, dentists, certified public accountants, and others; and (2) those “who pursue an art and make their living therefrom,” including writers, athletes, and others. Freelancers and home-based service provides also fall under professionals

If all of the above pertains to you, and you haven’t registered your services to the BIR yet, then you should make time to do so. Make sure that you do to avoid being tagged as a tax evader. Prepare the necessary documents and register your services. Accomplish forms and submit supplementary documents to revenue district offices (RDO).

 

Improve your tax knowledge

taxes

In order to steer clear of possible violations, you must have a prior knowledge of what they are. These are not only violations but they are considered criminal violations under the Tax Code, as stated by the BIR and they are as follows:

  • Failure to file tax return/s
  • Failure to pay taxes
  • Deliberate under-declaration of income or overstatement of deductions by more than 30% of that declared per return (substantial under-declaration or overstatement of deductions)
  • Hiding or transferring assets or income
  • Non-remittance of withholding taxes
  • Claiming personal expenses as business expenses (tax shield)
  • Failure to register with the BIR
  • Keeping more than one (1) book of accounts
  • Making false entries in financial books and records
  • Use of fake Certificate of Authorizing Registration (CAR), Tax Clearance Certificate (TCC), or other accountable forms

If you are found to have committed a violation of the provisions of the National Internal Revenue Code (NIRC), then you will be subject to the consequences and penalties which are imposed by the BIR.

 

Use an online tax calculator to compute your taxes and file them on time

calculator

The internet provides nifty tools to help you with a lot of daily tasks. One of them is filing and paying your taxes. Basically, online tax calculator is the best go-to guide in computing freelance taxes. Aside from real-time tax calculation, you can also use an online tax-filing platform to pay your taxes. With this, you can manage to skip lines at the bank to pay your taxes, with unlimited accessibility through various payment channels.

An online tax calculator will only require you to enter your income and expense, then that’s it! No more fuss in using calculators and spreadsheets which is a significant benefit for freelancers like you.

 

Key Takeaway

 

Avoiding delays in filing freelance taxes should be on top of your mind at all times. This is to ensure that you can work independently without financial troubles from additional expenses coming from penalties in filing and paying taxes on time. Follow these simple tips and be a regular taxpayer, you will reap long-term benefits from it.

Tax Filing Philippines: Choosing Graduated Rate or 8% Threshold Rate

Tax Filing Philippines: Choosing Graduated Rate or 8% Threshold Rate

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What are important factors that come into play with the new tax filing policies?

  1. Mechanics
  2. Conditions
  3. Qualifications

 

Tax filling in the Philippines can be a very daunting and tricky task. With President Duterte’s implementation of TRAIN (Tax Reform for Acceleration and Inclusion), there have been several new policies that fall in line with the new tax reform laws. DIY or freelance taxpayers are faced with major changes from the previous frequency, processes, formulas, and tax tables that were previously applied in the country.

According to the Bureau of Internal Revenue or BIR, if a professional is earning less than P250,000 on an annual basis, then he or she is exempt from paying percentage income tax or the 8% gross receipt tax. In terms of the new TRAIN laws, this simply means that you are not required to file any tax return. The past threshold for VAT taxpayers was P1,919,000 and is now currently raised to P3,000,000.

There are many new changes and that directly affect your calculated tax rates. One of which is that professionals are given certain options to adhere to when it comes to legal tax processing. So, it is important that you make sure that the tax calculator you are using is using the current system for calculation.

Below are overviews on what goes into the new income tax reform laws:

 

Tax Alert Mechanics

Tax Alert Mechanics

Under Republic Act No. 10963 of the TRAIN Law: graduated income tax rates for individuals have been reduced to income below P8,000,000. Payment of the following to taxable judicial persons remain subject to 10% or 15% expanded withholding tax rate:

  1. Professional fees, talent fees, commissions of serves rendered.
  2. Distribution of income to estate and trust beneficiaries.
  3. Income payment to brokers and agents
  4. Income payment to partners of GPP
  5. Medical practitioner professional fees
  6. Commission of independent or exclusive sales representatives and company marketing agents.

The reduction of withholding tax rate for self-employed individuals was implemented in order to be aligned with the 8% optional tax on gross receipts for considerations on the lower tax rates of individual income.

 

Income Tax Conditions

list

Self-employed individuals and professionals are now given a choice for their applied tax rates that identify their income tax liability. However, there are considerations that need to be met and observed before the taxpayer can select the options. Taxpayers that practice his or her profession and earn purely from self-employment have the option to avail of the following conditions:

  1. The graduated income tax rates –under Section 24, A, 2, a of the Tax amended.
  2. The 8% tax on gross sales and other non-operational income that is in excess of P250,000, in substitute of the graduated income tax rates under Section 24(A) and percentage tax under Section 116 of the Tax Code.

 

Taxpayer Qualifications

 

If you are an individual taxpayer earning annual gross sales of P2,000,000 from your business, according to the Tax Reform for Acceleration and Inclusion laws, the 8% flat tax rate option for self-employed professionals can be valid under certain qualifications.

An individual that earns from purely business-related income or mixed-income can only apply the 8% tax rate for the business income only. Non-VAT registered individual taxpayers of the following are granted the 8% flat tax rate option:

  1. Domestic carriers of garages
  2. International shipping carriers with business in the Philippines
  3. Water and gas utilities
  4. Television and radio broadcasting companies with annual gross receipts of the previous year that do not exceed P10,000,000
  5. Overseas dispatch coming from the Philippines
  6. Banks and financing intermediaries performing quasi-banking operatives
  7. Life insurance companies
  8. Authorized insurance agents
  9. Cockpits
  10. Cabarets, day or nightclubs, karaoke bars, karaoke bars, music lounges
  11. Boxing matches
  12. Professional Basketball
  13. Jai-alai and racetracks
  14. Horse race winnings
  15. Exchange of stock shares traded through the local stock exchange
  16. Exchange of stock shares in closely-held corporations

Gross receipts and sales that do not surpass the new VAT threshold of sales receipts accumulating to P3,000,000 are viable flat tax candidates. Signifying your intent by filing the 8% flat tax rate for the first quarterly income tax also grants you the 8% option.

 

Key Takeaway

 

It is crucial that you be well-acquainted with the new TRAIN laws when it comes to tax filling in the Philippines. The new tax income rates provide for many options where self-employed professionals and individuals can optimize his or her earnings.

Whether you are doing your own tax filing, working with a hired accountant for his or her services, or utilizing an online tax calculator, the new formalities that gravitate towards President Duterte’s TRAIN law implementations pose fundamental and structural changes to how your tax rate is determined.

Ultimately, the purpose of these changes is to incorporate a flat tax regime that is open to options, simpler, and easier to comply with self-employed individuals and professionals.

Tax Filing Made Even Easier

Taxumo Makes Tax Filing a Quick & Easy Online Experience

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Taxumo turns Tax Filing from what was previously a painful scary chore into a pleasant & quick online experience! Aligned with that promise, we are releasing our new UI. Built from the ground up with intuitiveness and ease in mind, filing your taxes are even easier than ever before.

What didn’t change?

Before we go into what changed, let’s talk about what didn’t change. Taxumo is still easy to use: you just enter income and expenses and press some buttons. In 1 click, forms are automatically filled out. Payment can be done through the website as well. So tax filing is still as easy as possible!

Read on to find out what DID change…